Beware of 'most-favored-nation' clauses

MGMA Connexion, Jul 2004

Financial Management

Listening in on MGMA e-mail forum discussions

"We are in the midst of a heated contract negotiation with an insurance carrier. For the carrier to increase its 'frozen' fee schedule for our practice, it requires a signed contract agreeing that we will not accept Sower reimbursement from any other carriers, except government-funded plans. Any of you familiar with this?"

Christy Mattey, MGMA member and practice manager, Physicians in Family Practice Inc., Oberlin, Ohio, christy86m@aol.com, from the MGMA Obstetrics and Gynecology Assembly e-mail forum

Responses

"I strongly encourage your department and medical group not to enter most-favored-nation (MFN) contractual arrangements, which is what you describe."

"I just sat through a seminar that included this issue. The advice was to avoid MFN arrangements if at all possible. Only execute a contract after an intense analysis. If it cannot be avoided, there are some things to mitigate the damage.

"Make the contract apply only to plans of the same type. For example, HMO rates will be applied only to HMO plans with the same patient mix, with the same size plan (covered lives, volume), in the same geographic location. Also, limit the term of the contract, keeping it as short as possible. If it will be audited annually, identify the auditor, audit procedure, etc., and conduct your own audit for significant MFN triggers.

"Two issues you can use to argue against this: First, other terms of the agreement make the cost of providing care different. Then look for items that might be issues. Those could include how complicated the process is for prior authorization, the need for referrals, difficulty of using formulary and provider books, and the volume of your business (it is more difficult to meet special requirements for a small percentage of patients than it is for a large percentage). Other issues could be credentialing requirements, use of special labs and other diagnostics. As you read the contract you will notice others.

"Second, they might be getting into antitrust issues if they are trying to match all the payments, so how will they measure what is a 'lower' fee? Is that one code at a time or the average? Volume of each code will determine the overall value of one contract over another. For example, one contract can pay a higher rate for many seldom-used codes and be a worse deal than one that pays the other way around."

"I strongly encourage your department and medical group not to enter mostfavored nation contractual arrangements."

The e-mail forums - a benefit of your membership in the Medical Group Management Association (MGMA) - host discussions that often resonate with all medical practices, regardless of size or specialty. Party Line features topics gleaned from listening in on member dialogues.

@www.mgma.com

* Visit the member area and sign up for an e-mail forum or participate in discussion boards

* In the Article Archive in the member area, search under the subject heading "managed care - contracts"

* In the Store, enter 5200 in the Search box for Managed Care Contract Reference Guide

e-mail us

Has your practice faced "most-favored-nation" clauses in payer contracts? Tell us at connexion@ mgma.com